The DCIT, Circle-1(2), Baroda V. M/s. Interlink Petroleum Ltd., Baroda

ITA 2553/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94726 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 30-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO.2553/AHD/2012 (ASSESSMENT YEARS:2009-10) ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), BARODA APPELLANT VS. INTERLINK PETROLEUM LTD. 206, GAYATRI CHAMBERS, BH. HOTEL RAJPATH, R. C. DUTT ROAD, BARODA -390007 RESPONDENT PAN: AAACI4175K /BY APPELLANT : MS. SANYOGITA NAGPAL, SR. D.R. /BY RESPONDENT : SHRI SUNIL TALATI, A.R. /DATE OF HEARING : 30.11.2015 /DATE OF PRONOUNCEMENT : 02.12.2015 ORDER PER RAJESH KUMAR, A.M: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-I, BARODA, DATED 29.08.2012 FOR A.Y. 2009-10 ON FOLLOW ING GROUND: 2 ITA NO.2553/ AHD/ 2012 (ACIT VS. INTERLINK PETROLE UM LTD.) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT T HE INTEREST INCOME OF RS.55,63,737/- EARNED BY INVESTING FUNDS CREATED THROUGH VARIOUS SOURCES, INCLUDING PREFERENTIAL EQUITY ISSUE, FOR LONG PERIODS, YEAR AFTER YEAR, WITH A MOTIVE TO EARN INTEREST INCOME FROM IDLE FUND, AS BUS INESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES. 2. THE ONLY ISSUE RAISED IN THE GROUND OF APPEAL IS AGAINST THE DIRECTION GIVEN BY CIT(A) TO THE A.O. TO TREAT THE INTEREST I NCOME OF RS.55,63,737/- EARNED BY INVESTING FUNDS IN FIXED DEPOSITS AS BUSI NESS INCOME INSTEAD OF INCOME FROM OTHER SOURCES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY ENGAGED IN THE BUSINESS OF EXTRACTION OF OIL AND GAS. THE ASS ESSEE FILED ITS RETURN OF INCOME ON 27.09.2009 DECLARING LOSS OF RS.1,78,17,2 40/- DURING THE YEAR. THE ASSESSEE DERIVED INCOME INTER ALIA BY WAY OF IN TEREST ON FDRS RS.55,63,737/- AND TREATED THE SAME AS INCOME FROM BUSINESS. THE SAID INCOME ACCRUED FROM BANK DEPOSITS WHICH WERE MADE O UT OF IDLE FUNDS IN THE BUSINESS OF THE ASSESSEE KEPT FOR BUSINESS PURPOSES . 3.1 THE LD. A.O. OBSERVED THAT INTEREST ON BANK DEP OSIT AMOUNTING TO RS.55,63,737/- WAS FACTUALLY AN INCOME FROM OTHER S OURCES WHEREAS THE SAME HAS BEEN TREATED AS INCOME FROM BUSINESS AND ACCO RDINGLY TREATED THE SAID INCOME AS SUCH. 4. LD. CIT(A) DIRECTED THE A.O. TREAT THE INTEREST FROM BANK DEPOSITS RS.55,63,737/- AS INCOME FROM BUSINESS BY OBSERVING AS UNDER: 2.2 I HAVE CONSIDERED FACTS OF THE CASE AND APPELLANTS SUBMISSIONS. APPELLANTS CONTENTION THAT FUNDS RAISED THROUGH VARIOUS SOURCES INCLUDING PREFERENTIAL EQUITY ISSUE FOR ITS BUSINESS OF EXTRACTION OF OIL & GAS , DUE TO BEING TEMPORARILY SURPLUS WERE PARKED IN BANK FIXED DEPOSITS TO EARN INTEREST IS BORNE OUT FROM THE DETAILS OF UTILIZATION OF FUNDS AND OF PERIOD OF INVESTMENT I N FDS. THERE IS NO DISPUTE THAT THE FUNDS IN QUESTION AS WELL AS INTEREST EARN ED WERE UTILIZED FOR APPELLANTS BUSINESS ACTIVITIES ONLY. ASSESSING OFFICE RS OBSERVATION THAT INTEREST WAS EARNED YEAR AFTER YEAR DOES NOT CHANGE THE POSITION THAT I NTEREST WAS FROM SURPLUS FUNDS KEPT READY FOR BUSINESS AND TEMPORARILY PARKED IN BANK 3 ITA NO.2553/ AHD/ 2012 (ACIT VS. INTERLINK PETROLE UM LTD.) DEPOSITS INSTEAD OF KEEPING THEM IDLE. ON SIMILAR FACTS, ITATS MUMBAI BENCH IN THE CASE OF VOLTAS INTERNATIONAL LTD. (2010) 2 ITR (TRIB.) 410 (MUM) HE LD THAT WHERE IT WAS A CASE OF TEMPORARILY SURPLUS FUND AVAILABLE TO ASSESSEE NOT IMMEDIATELY REQUIRED FOR ITS BUSINESS PURPOSES, WHICH WAS KEPT IN FIX ED DEPOSITS BUT NEVERTHELESS, FUNDS WERE MEANT ONLY FOR ASSESSEES BUSINESS ACTIV ITIES, SUCH INTEREST WAS ASSESSABLE AS BUSINESS INCOME. HIGH COURT OF BOMBAY IN T HE CASE OF CIT VS. INDO SWISS JEWELS LTD. (2006) 284 ITR 389 (BOM.) HELD THAT INTERE ST EARNED BY ASSESSEE ON SHORT TERM DEPOSITS OF MONEY KEPT APART FRO PURPOSE OF BUSINESS HAD TO BE TREATED AS INCOME EARNED FROM BUSINESS AND THE SAME COULD NOT BE TREATED AS INCOME FROM OTHER SOURCES. RELIANCE IS ALSO PLACED ON DECI SION IN THE CASE OF CIT VS. LOK HOLDINGS (2010) 189 TAXMAN 452 (BOM.). DECISION RE LIED UPON BY THE ASSESSING OFFICER IN THE CASE OF ASSAM PLANTATION CORPORATION DEVELOPMENT CORPORATION LTD. (1996) 221 ITR 392 (GAUHATI) IS IN A DIFFERENT CONTEXT I.E. WHETHER INTEREST EARNED ON SHARE CAPITAL MONEY KEPT IN FD I N BANK WAS ASSESSABLE TO TAX AT ALL OR WAS EXEMPT. THE COURT HAD HELD THE SAID INTE REST INCOME TO BE TAXABLE AS INCOME FROM OTHER SOURCES; HOWEVER, THE ISSUE OF ASSESSMENT AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES WAS NOT ADJUDI CATED, BEING NOT BEFORE THE COURT. FOLLOWING THE DECISIONS IN THE CASES OF INDIA SWI SS JEWELS LTD., LOK HOLDINGS LTD. AND VOLTAS INTERNATIONAL LTD. (SUPRA), IT IS H ELD THAT INTEREST INCOME OF RS.55,63,737/- IS TO BE ASSESSED AS BUSINESS INCOME IN APPELLANTS CASE. THIS GROUND OF APPEAL IS ALLOWED. 5. THE LD. D.R. ARGUED THAT THE INTEREST FROM BANK DEPOSITS WAS RIGHTLY TREATED BY A.O. AS INCOME FROM OTHER SOURCES AND TH EREFORE PRAYED THE ORDER OF CIT(A) BE ANNULLED AND THE ORDER OF A.O. BE REST ORED. THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THE FUNDS WERE IN SURPLUS T EMPORARILY AND THEREFORE, THE SAME WERE INVESTED IN BANK DEPOSITS IN ORDER TO EARN INCOME, SO THAT, THE INCOME OF THE ASSESSEE IS MAXIMIZED BY UTILIZING TH E IDLE FUNDS. IT WAS ALSO ARGUED THAT THE FUNDS AS WELL AS THE INCOME DERIVED FROM SUCH FUNDS WERE UTILIZED FOR FURTHER BUSINESS ACTIVITIES. THE LD. A.R. RELIED ON THE DECISION IN CASE OF VOLTAS INTERNATIONAL LTD. (2010) 2 ITR (TRI B.) 410 (MUM), CIT VS. INDO SWISS JEWELS LTD. (2006) 284 ITR 389 (BOM.), CIT VS. LOK HOLDINGS (2010) 189 TAXMAN 452 (BOM.) AND PRAYED THAT IN VIE W OF THE RATIO LAID DOWN IN THESE JUDGMENTS THE ORDER OF CIT(A) DESERVE S TO BE UPHELD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAD SOME IDLE FU NDS WHICH WERE INVESTED IN BANK DEPOSITS AND THE ASSESSEE DERIVED INCOME FROM SUCH DEPOSITS. THE ASSESSEE TREATED THE INTEREST AS INCOME FROM BUSINE SS ON THE GROUND THAT THE 4 ITA NO.2553/ AHD/ 2012 (ACIT VS. INTERLINK PETROLE UM LTD.) SAME WERE PART OF BUSINESS INCOME AND NOT OF OTHER SOURCES. IT IS FURTHER NOTED THAT THE FUNDS AS WELL AS INTEREST EARNED WER E UTILIZED FOR BUSINESS PURPOSES. THE HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. INDO SWISS JEWELS LTD. (SUPRA) HAS HELD THAT INTEREST EARNED BY ASSESSEE ON SHORT TERM DEPOSIT OUT OF MONEY KEPT APART FOR THE PURPOSE OF BUSINESS HAD TO BE TREATED AS INCOME EARNED FROM BUSINESS AND THE SAME COULD N OT BE TREATED AS INCOME FROM OTHER SOURCES. IN THE CASE OF CIT VS. LOK HOL DINGS (SUPRA) THE SAME VIEW WAS UPHELD. THE FACTS OF THE CASE OF THE ASS ESSEE ARE SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT AND WE , THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE S AID DECISIONS, UPHOLD THE ORDER PASSED BY CIT(A) AND DISMISS THE APPEAL OF RE VENUE. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS THE 2 ND DAY OF DECEMBER, 2015. SD/- SD/- (SHAILENDRA KUMAR YADAV) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 02/12/2015 TRUE COPY / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE $ %&%'( ) / CONCERNED CIT 4 )- / CIT (A) , -./ 00'(1 '( 1 23& / DR, ITAT, AHMEDABAD 4 /56 78 / GUARD FILE. BY ORDER / 1 / 2 % '( 1 23&